The CRV Bridge Loan
Thursday, November 02, 2006
The Bridge Loans (or Convertible Notes as they are called in financial terms) are going mainstream. Charles River Ventures, one of the oldest VC firms in the valley has started a new program called CRV QuickStart. Under this program they will provide money upto $250 K for early stage startups looking for angel money. The amount will be provided at a 6% rate of interest and 25 % discount converted once the company reaches the Series A round. In return CRV will hold the right to be participate in Series A and contribute at least 50 % to it. If Series A does not happen then CRV loses the money and the company is not liable. For more information on how convertible notes work, go here. Here is a brief FAQ on the program.
Since the launch on Wednesday (on TechCrunch!), it has kicked up a minor storm in the VC circles. The who's who of the VC world have commented on it. Generally it has been welcomed as a good idea and CRV has been appreciated for accepting the ground realities. O'Reilly Radar has a good post of the real challenges VC's businesses are up against. And by the looks of it, they have attracted significant interest. Several other VC firms are also thinking about similar programs. Depending upon its success, it might one day become the norm for all VC firms.
IMHO this model can work work wonders in India. High Tech startups in India face several challenges: lack of mature ecosystem, very little angel money and knowledge, dearth of talent with track record and not many good incubators around. Finding ways around these generally saps the energies of the founders. A scheme such as this would enable them concentrate on the work. Several Tier A VC firms in the process of establishing their presence in India right now. Hopefully someone will think about it.
Otherwise we will just have to wait till CRV comes to India.
Update: Seems that startups in India are also eligible. Waiting for a confirmation.
Update 2: Negative. :(
Since the launch on Wednesday (on TechCrunch!), it has kicked up a minor storm in the VC circles. The who's who of the VC world have commented on it. Generally it has been welcomed as a good idea and CRV has been appreciated for accepting the ground realities. O'Reilly Radar has a good post of the real challenges VC's businesses are up against. And by the looks of it, they have attracted significant interest. Several other VC firms are also thinking about similar programs. Depending upon its success, it might one day become the norm for all VC firms.
IMHO this model can work work wonders in India. High Tech startups in India face several challenges: lack of mature ecosystem, very little angel money and knowledge, dearth of talent with track record and not many good incubators around. Finding ways around these generally saps the energies of the founders. A scheme such as this would enable them concentrate on the work. Several Tier A VC firms in the process of establishing their presence in India right now. Hopefully someone will think about it.
Otherwise we will just have to wait till CRV comes to India.
Update: Seems that startups in India are also eligible. Waiting for a confirmation.
Update 2: Negative. :(
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